A town called Malus

Bankers with big bonuses usually drive up house prices in the UK capital. But this year’s payouts will contain less upfront cash. Meanwhile, housing supply is likely to increase. Add it up, and London house prices look set to give up some of last year’s surprising minirecovery.

Context News

House prices in the prime central London property market rose 8.8 percent in 2009 and are now only 13 percent below peaks recorded in Autumn 2007, according to Savills, the property consultancy.

Financial and business services sector buyers account for around half of total demand in prime London markets. Outright cash buyers, who do not require a mortgage, constitute 70 percent of the prime central London market, with a third of these directly from the financial and investment markets sector.

The average number of cash buyers in the market between March and August, after bonuses have been paid, is 75 percent higher than between September and February, according to Savills. This typically increases overall transaction levels by 30 percent.

The average growth in the value of a prime central London property between December 1999 and December 2009 was 83.4 percent, according to the Savills prime central London index.

Goldman Sachs has committed to cap the pay and bonuses of 100 UKbased partners at 1 million pounds each, the company said on Jan. 21. Credit Suisse and Barclays have also flagged that bonus payments would be structured relatively less generously for some of their UK staff.